PDH spreads in China

After methanol-to-propylene (MTP), Chinese companies are racing to build propane dehydrogenation (PDH) plants with eight new projects announced over the last three months.

The blog estimates that PDH projects with a total propylene capacity of 4.6m tonnes/year have been planned for completion in 2013-14 (a full list is available here China PDH projects.xlsx).

Most of the companies have yet to confirm the derivatives planned downstream of the PDH project and some such as Zhejiang Julong Petrochemical have indicated that some of the propylene will be sold in the local market. The companies have also not said if feedstock propane will be imported or sourced locally.

The interest in propylene is understandable. Chinese propylene demand, which accounts for 15% of global consumption, is estimated to be growing at 5-6%/year. And the country imported nearly 1.5m tonnes of propylene last year.

But can PDH economics be viable in China? Successful PDH operators in the Middle East have access to cheap propane and it is uncertain if this is going to be the case in China, especially if it has to be imported.

Some analysts are predicting ample availability in the country as natural gas is displacing liquefied petroleum gas (LPG) as a domestic fuel. Dimethyl ether (DME) blending with LPG is poised to take off with new national specifications likely to be announced by June 2010. Trials are also being carried out to use pure DME as a household fuel which should release even more LPG for petrochemical use.

On the supply side, the start up of new refineries has resulted in increased LPG capacity and the trend is likely to continue.

An easier approval process is likely another reason for companies to build PDH plants rather than crackers which are firmly in the hands of state-owned companies.